Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2000:20: Measures of Technology and the Short-Run Responses to Technology Shocks - Is the RBC-Model Consistent with Swedish Manufacturing Data?

Mikael Carlsson
Additional contact information
Mikael Carlsson: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: This paper estimates technology growth using several variants of the Hall (1988, 1990) method on data for Swedish two-digit manufacturing industries. More specifically, I first apply and evaluate two different approaches to control for varying factor utilization developed by Basu et al. (1998) and Burnside et al. (1995). Second, I propose a generalization of the latter specification. Finally, the cyclical behavior of the resulting technology measure is studied and the responses of hours and output to a technology shock are estimated using a variant of the standard VAR-approach. The main finding is that a positive technology shock has, on impact, a contractionary effect on hours and non-expansionary effect on output. This finding is inconsistent with the predictions of the standard real business cycle model.

Keywords: technological change; cyclical factor utilization; business fluctuations; panel data; manufacturing

JEL-codes: C33; D24; E32; L60

62 pages, December 5, 2000

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